Chancellor George Osborne should end the right of companies to import low-value items VAT-free from the Channel Islands and do something to reduce petrol and diesel prices, says a small-biz body.
Ahead of Wednesday's Budget various runners and riders are jostling for attention. The Forum of Private Business said it was time to …

COMMENTS

bad business model again

so, some folks business model can't compete (regardless of the cause) and rather than fix their end, they feel the other end should be crippled. And all that happens is that the consumer ends up paying more.

Actually.

I agree with them. If your a large company that can afford a warehouse in the channel islands then you are effectively VAT exempt for CD/DVD sales. That's rather unfair for smaller businesses that then can't compete because they are based on the mainland and DO have to pay VAT.

tax

Fix their end is move to Jersey to avoid paying tax.

The net effect is a cost to you. If the government weren't allowing this tax loop hole (which is also only economicly viable due to royal mail being required to deliver things for pennies from CI) then dvd warehouses would be in normal distribution centres like warrington, rochdale or burnley.

The costs fo running these warehouses are lower, so except for tax you would (could) pay less.

The profits from these warehouse operators and wages for all the staff would be subject to UK tax and the wages of the workers would go to local shops and businesses rather than ones in Jersey.

Don't forget also, the government aren't a business, if they need x pounds in tax they will just tax it elsewhere. So losing all this tax revenue just means you pay more some place else (it may even be secondary - maybe higher business rates cause your mocha frapuchino to cost 5p more tomorrow).

saving 40p off your next dvd really isn't worth it in the bigger picture.

Yeah

Cuz Joe Blow/Wahid Ahmed who run your local IT shop/corner store can afford to operate their own warehouse on the Channel Islands. It's Joe and Wahid who realise profits in this country, pay taxes in this country and add to the social value of this country. The multi-nationals don't.

This law was meant to help flower sellers? Fine. Then change the law to explicitly state flowers!

@The BigYin

"The multi-nationals don't realise profits in this country, pay taxes in this country and add to the social value of this country. "

Since when did Tesco, Sainsburys, ASDA, Google, Microsoft, CitiBank, Barclays, Santan....you get the picture, not pay taxes? not profit? and not add to the social value of this country (especially the banks who allow you to have that shiney new car on the drive of your mortgaged house)? The only tax that can be avoided is corporation tax (by playing the system), all other taxes (including VAT and PAYE) are paid for in full. Providing a HELL of a higher contribution than Mr Patel of Patels News and Wines in Birmingham.

Errrrr...Learn to read.

@AC 13:06

Or, maybe most smaller businesses can't afford the extra costs involved in running a separate company and warehouse, in a separate jurisdiction - economies of scale anyone? Some business models only work on a larger scale, which may inherently make them anti-competitive.

And the consumer only ends up paying the tax they bloody well should be paying on it anyway!

Just vat? Or vat and duty ?

If abolishing the duty/vat exemption also applies to goods from the rest of the world, it is going to make buying low value items from overseas extremely cumbersome.

An item sold for £3 is going to get maybe 50p of duty and vat added -- but parcelforce and the like are still going to insist on charging an exhorbitant sum of money -- maybe ten pounds or more -- for collecting that 50p. That's not efficient or worthwhile, nor could customs cope with it, and the £18 exemption recognises this.

If the limit is going to be abolished, then the absolute first priority should be to find a way of allowing/requiring the *sender* to prepay any duty and vat due -- with the sender paying the actual amount of vat and duty and no admin charge being added.

Parcelforce will no doubt cry foul on allowing senders to prepay duty and vat -- but that will serve them right for improperly turning imports into a cash cow monopoly in the first place.

I'm undecided on this.

The way I see it as things stand I would buy a CD (or whatever) from Amazon or Tesco (or whoever) and pay less. If they close this loophole I'll still be able to buy the CD (or whatever) from Amazon or Tesco (or whoever) becasue they _will_ be cheaper than the corner shop would be -- economies of scale say this -- so in the end I'm the one out of pocket to the government.

OK, there may be cases where a business if on the threshold of being able to have a tax-dodge site in the channel islands, but I bet they're few and far between.

So, the person paying the VAT here is the consumer and, frankly, I'm happy giving as little in tax as I can for as long as the money is spent to help multi-millionaire thieves in their bonuses.

We don't want your feelthy stinking facts

How are we supposed to have an ill informed rant about stuff outside our subject area if experts are going to stick their oar in with reasoned argument? Now I'm off to write a piece for the Guardian on how terrible it is that Barclays benefit from SSE when it's an inevitable consequence of their corporate structure, while it's OK for, erm, the Guardian, to deliberately restructure itself just squeeze inside the rules.

Better business model.

Presumably the reason that the Channel Islands can avoid charging VAT and have lower overall taxes is because their government does not enter into illegal alliances with foreign political entities against the wishes of the people.

The reason that Tesco does what it does (if it does) is because they can, it has an uncomplicated view of the world, it seeks only to make profit, which is fair enough. If only government were so single minded about looking after the genuine interests of its citizens... Property rights etc.

So, in essence "Gideon" Osborne (Little Lord Fauntleroy) and the rest of his treacherous pals should perhaps put their house in order and make it a daft move to set-up in somewhere like the Channel Islands. They could start by butting out of about 80% of peoples' lives and reducing taxes appropriately.

George Orwell, because Gideon changed his name to George, like Orwell (Eric Blair)... Orwell wrote an apocryphal story and Osborne and Little (aka Scam...eron) treat it like an operating manual.

Alternatively...

Rather than try to control it too tightly and harming the group it was originally setup for include the phrase 'perishable goods'. That should ensure that the people it was intended to help still get that help whilst the Supermarkets lose this loophole.

Any time someone of the ilk of Tesco/Amazon goes to the cost of setting up an operation like this it is a good indicator that there is a loophole worth closing. The lost VAT from the CDs etc will amount to a substantial amount of money which should have gone straight to that nice Chancellor to help balance the books.

@Tim Worstal

Was about to say the same myself!

However, tjhere is, I gather, another provision which allows a country to apply to the EU abolish this relief for specific types of goods from a specific location if it can be shown that goods being routed this way are distorting the market ... apparently Denmark have already invoked this provision in the past to close a VAT loophole where magazines were being imported via the Aland islands to avoid Danish VAT.

I suspect what will happen is reduction of exemption rate down to the lowest value (i.e. around £8.50-9.00) along with an intention to seek an exemption for LCVR being applied to the Channel Islands for items not produced their (i.e. to avoid affecting the dairy and flower trade which is why the channel islands exemption was initially set up) if these imports get any bigger.

Business is business

Sadly though it put small businesses at risk (which I perfer to support) you cannot blame any business who is using this loophole. If they don't do it, someone else will and they will lose business. Its a tough and horrible market at times.

Yes the Government should help the smaller business more, maybe allow more money to be made without tax. This would allow them to grow better and offer better prices so they can rival the bigger companies.

The problem is with the country in debt and the Government needing to save money it would be hard to give any business the chance to pay less tax when it needs it.

Wider implications

This would kill any prospect of buying small items from outside the EU on eBay. Sometimes stuff isn't available from within the EU, especially secondhand goods and odd spare parts. The £18 limit is low as it includes the cost of postage, but if all you need is a small $10 widget to make something work again, it's OK.

Otherwise everyone will start (OK, continue) committing customs fraud by marking everything as "gift" or of no value.